Rosalind Evans
Mortgage rates declined for the second consecutive week, prompting existing and prospective homeowners to consult their lenders.
As per the Mortgage Bankers Association’s seasonally adjusted index, there was a 7.2% uptick in mortgage application volume last week compared to the preceding week.
The standard contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell to 6.77% from 6.81% the previous week. Additionally, points dropped to 0.65 from 0.66 (including the origination fee) for loans backed by a 20% down payment.
Despite the week-on-week rise of 6% in home loan refinances applications, they remained 41% lower than the corresponding week a year ago. While rates have eased somewhat, they are still significantly higher than a year ago and more than double the rates seen during the initial years of the Covid pandemic, which saw a refinance boom. Many borrowers are locked in at rates lower than what’s available, discouraging them from opting for cash-out refinance options.
On the other hand, applications for mortgages to buy a home surged by 8% week-on-week yet were 27% lower than the same week the previous year.
Joel Kan, an MBA economist, commented in a press release that despite the rates being significantly higher than last year, combined with a shortage of houses for sale, they are constraining the homebuying activity in numerous markets. He added, “The average loan size on a purchase loan decreased for the third consecutive week, indicating an increased first-time homebuyer activity in the purchase market.”
While mortgage rates have remained relatively stable this week, they could fluctuate following the Federal Reserve’s latest policy meeting and updated rate forecasts, which will be announced on Wednesday.
Matthew Graham, COO of Mortgage News Daily, suggested that the Federal Reserve might hint at further rate increases in 2023 through these forecasts. He stated, “Although the Fed Funds Rate doesn’t directly dictate mortgage rates, such a move would still exert significant upward pressure on interest rates of various types.”
The mortgage industry remains sensitive to changing economic scenarios, with interest rates and market dynamics significantly impacting borrowing and buying behaviours. While existing homeowners contemplate refinancing options, potential buyers must assess current market conditions against their financial realities. As the Federal Reserve prepares to release its latest policy decisions, lenders and borrowers are bracing for changes that could reshape the mortgage landscape.
